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Cambridge tech consultancies rule the world

Cambridge has staked its claim as the technology consultancy capital of the world.

While Silicon Valley holds sway in producing the heavyweights of global technology based on turnover, US corporate giants are increasingly exporting their product design & development needs to tech consultancies in the UK’s innovation cluster.

It’s Cambridge brainpower that is feeding their bottom lines, figures gleaned in an exclusive Business Weekly survey show. Of the major Cambridge consultancies by turnover, the average overseas work represents 70 per cent of total projects with 42 per cent from North America.

Taking the sector as a whole, including the smaller but increasingly influential consultancies, the average figure for overseas business is 49 per cent with 30 per cent coming from across the Atlantic.

Consultancies in the cluster say it remains more productive and cost-effective for American, Asian and European clients to shop abroad rather than set up and staff costly hothouses internally.

The global economic hotspots just don’t have such concentrations of design & development innovators on their own soil, Cambridge technology entrepreneurs confirm. There are now around 16 specialist consultancies in the Cambridge cluster and Charles Cotton, CEO of Cambridge Phenomenon, says: “I am not aware that there is another concentration of like firms anywhere else on the planet.”

He reckons the new Phenomenon is the love child of the original. “On my last count there were 14 consulting firms in the area all of which stem from Cambridge Consultants' initiative in 1960.”

A couple more have set up or moved into the cluster recently while some of the smaller players are beginning to pack on muscle. Being the first port of call for US clients and others from the Rest of the World is evidenced in our poll.

US and overseas sales

Privately-owned TTP, which doesn’t like to talk about its work in public, would only say that “Generally, business is brisk across all geographies and all industry sectors.” But Cambridge Consultants, which was the mother and father of this family for invention, says 75 per cent of its work now comes from overseas “from the US, parts of Europe and, increasingly, parts of Asia.”

Team Consulting still gets 38 per cent of its work from the UK but now enjoys 31 per cent from the US and 30 per cent European custom. PA Consulting says that between a third and two-thirds of its technology business at varying times comes from a global customer base.

Sentec consulting turnover from overseas is running at around 74 per cent – 50 per cent of that from the US and a further 12 per cent from Canada. Japan pops up at a useful eight per cent.

Sagentia credits North America for 50 per cent of its revenues, with 35 per cent from Britain and 15 per cent from the rest of Europe. The US and Canada account for 60 per cent of its projects and the 20 per cent Rest of the World spread now matches the UK. Demonstrating Sagentia’s reach, the geographic spread for significant projects is vast, from Europe to China.

Plextek, which is becoming increasingly influential, still does 65 per cent of its work in the UK but North America and Asia Pacific now each account for 15 per cent.

One of the rising stars – Cambridge Design Partnership – reports that 30 per cent of its business last year emanated from global customers. In the past, US work has added up to more than 50 per cent of revenue and the company recently opened a US office to drive more growth.

42T says many of its largest clients are multinational and predicts that this year well over half of projects will be for international clients, building on figures of 60 per cent UK, 20 per cent Europe and 18 per cent North America.

Workload profiles

Most of the consultancies are global influencers in major wealth and job creating sectors, such as wireless and medical devices. The client profile is purely medical for Team.

CEO Dan Flicos said: “We are 100 per cent focused on medical device development and within this sector we work across drug delivery, critical care, regenerative medicine and surgical. We continue to see strong demand in all regions despite the global economic downturn. We expect a disproportionately high growth in percentage terms from India and the Far East over the next three years.”

Cambridge Consultants says one-third of its business is Medtech, one-third wireless and one-third consumer and industrial products but adds: “Increasingly we are seeing projects which require a mix of these skills - for example, medical products are increasingly using wireless technology, the barriers between some medical and consumer products are becoming more blurred, consumer products increasingly have wireless elements to them and so on.

“The fact that we have such a wide range of expertise across so many different market segments all under one roof means we are uniquely positioned to take advantage of this market fusion.”

PA Consulting Group’s head of technology, Dave Smith, said that as a technology firm within a management consultancy, customers especially valued PA’s ability to look at the whole of their projects “end-to-end and the fact that we can address entire business needs in-house at our technology centre near Cambridge.

“Between a third and two thirds of our technology business - in sectors including healthcare, consumer products and defence and communications - comes from a global customer base. We have helped pharmaceutical customers with transformational business cases, for example, when they need to go to market in a completely different way and support this, not just with product design and development, but also look at areas such as supply chain and IT service development.

“Our consumer product clients want rapid delivery times, from the initial idea to the product on the shelf; so being able to design, develop and prototype products as well build completely new manufacturing processes in-house helps them gain a competitive advantage.”

Cambridge a global powerhouse

Sentec’s prime segments are Smart Grid, Home & Commercial Energy management, Consumer Products, and Transportation and the consultancy has longstanding expertise in the entire energy management arena. CEO Dr Mark England said: “Around 50 years ago, Cambridge pioneered the concept of creating the world’s ultimate technology industry cluster fuelled by the aura of its world leading research university.

“The global reputation this has achieved continues to attracts the highest calibre of creative talent, both technically and commercially, allowing Cambridge to maintain its leading global status. If you are a business that needs innovation, the question is more, why wouldn’t you work with a Cambridge company?

“There have been many copycats over the years but Cambridge has continued to grow in stature, creating deeply specialist capabilities in particular fields – inkjet, computing, genomics and medical devices to name but a few.

“So we shouldn’t really find it surprising that global powerhouse businesses continue to look to Cambridge companies for their cutting edge research and development needs, rather than looking closer to home. Businesses outsource their R & D to consultancies in Cambridge expecting the extraordinary, and that’s what the talented local companies deliver.”

Sagentia doesn’t foresee the tide from the other side of the Pond being stemmed, let alone turned. A spokesperson said: “Global customers continue to be a major part of our business and in North America, for example, we have seen significant anecdotal and empirical evidence that R & D drive is healthy, with companies from both the East and West coasts increasingly looking for partners to outsource work to.”

In medical devices, Sagentia works across the patient care continuum identifying and developing innovative diagnostic, surgical and patient care devices and systems.

In the Consumer sector, clients are focused primarily in the personal care, home care, home appliances and food & beverage categories. For the industrial sector, there is a focus on technology driven, cost effective innovation. Sagentia clients in this sector work across analytical instrumentation, metering and oil & gas.

Projects range from developing precision laboratory instrumentation functionality into smaller, more portable instruments that can be used in the field, to developing sophisticated optical detector solutions or smart metering technologies that can survive in harsh environments, and helping clients improve drilling technologies or deploy products into harsher environments where reliability, remote monitoring and control are vital.

He said: “I would argue that Cambridge consultancies working for global clients is nothing new but the drivers for operating in the global markets are different than they were.

“In the 1990s, when the transition from analogue-to-digital was fuelling the growth of most of the technology consultancies in Cambridge, the worldwide demand for expertise in the new digital technologies was taking Cambridge companies all over the world, yet the outlook and drive of Cambridge companies was maybe less global.

“This changed when the rate of Cambridge technology startups increased (many of them spin outs from the technology consultancies rather than the university, as is often thought) and overseas investors took an interest in Cambridge.

“That was followed by global corporations opening an R & D centre in Cambridge. The final ‘push’ was a changing market place, with many of the digital technologies becoming a commodity and the Cambridge consultancies needing to spread their wings and operate more globally.

“Other countries, notably the US, have these consultancies but often companies that start with the technology consultancy model do so as a means to an end, namely to transform into a product company. In Cambridge this is different. The technology consultancies have continued to grow – often organically – and have spun out startup companies rather than change themselves.”

Last year, over half of Cambridge Design Partnership’s new business came from large blue chip companies and, as approximately a third of its work is in healthcare and the company continues to expand internationally, CDP predicts that more of its business will come from major pharma and Medtech multinationals in Europe and the US.

A CDP spokesperson said: “Our engineers speak 12 languages between them including Spanish, French, Italian, Dutch, German, Hebrew and Croatian (native and fluent), as well as Portuguese, Japanese, Cantonese and Russian. This enables us to approach and work with global companies – for example, we recently started working with a large French consumer company, as one of our designers is French and leads the project with them.”

Dominique Freeman, director of business development for Cambridge Design Partnership USA, heads up the US office and before she joined CDP used to be CEO of Pelikan Technologies, a US diabetes diagnostics company. She chose to work with CDP and after selling Pelikan, came to work for CDP because she had built such a strong relationship with the company.

She says: “At Pelikan, we struggled to find specialist engineering skills in the States. In the US, it’s widely understood that European engineers have a better education; their schooling and training is more intense and high-end.

“We went to Cambridge Design Partnership because we knew that their engineers have been educated at the best universities, receiving a world-class education. In addition to that, they are skilled at solving difficult problems that many companies can’t solve internally, through specialist knowledge, expertise & multidisciplinary teams.”

Startups fuel consultancies

42T revenues are mainly split across three sectors – healthcare (30 per cent), Industrial & energy (35 per cent) and Consumer, 35 per cent. While large corporates account for 65 per cent of project revenue, 20 per cent comes from Mid Caps and 15 per cent from SMEs.

Jeremy Carey, a consultant at 42T, said: “Many of our largest clients are multinationals. In recent years there has been a trend for us to win more work from overseas as our reputation has grown.

“Often we win initial work from a UK arm of a multinational and are then recommended to other parts of that organisation in North America or Europe. This year I expect well over half of our work to be for international clients. As one might expect, SMEs tend to be largely UK based while the multinationals will travel further to find world-class expertise.

“I believe Cambridgeshire has become a world-class centre of product development because of three things – 1) Talented scientists and engineers (aided by the university and the existing broad base of employers seeking these kinds of individuals) are concentrated into quite a small area; 2)Knowhow around the innovation and product development process (built up inside these organisations over decades of doing this kind of work) and 3)Technology based start-up companies fuelling the system.

“I think technology startups may be more important than they are sometimes given credit for because while they are only a small part of revenue and not all of them are successful, the people that build these businesses are often involved in product development later in life, either with new start-ups or running R & D departments for large corporates as consultants themselves.”